description: tags: loans-proposed-2

8/14/2019 description: tags: loans-proposed-2

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Proposed Regulatory Language

Contextual Format

Loans Committee

Origin: ED

Issue: FFEL/DL Entrance Counseling for

Graduate/Professional PLUS Borrowers

Regulatory Cite: 682.603, 682.604(f), 682.604(g),

685.301, 685.304(a), and 685.304(b)

Summary of Change: Require institutions, as part of the

process for certifying a loan (in the FFEL program) or

originating a loan (in the Direct Loan program), to notify

Graduate/Professional PLUS Loan student borrowers who are

eligible for Stafford Loans of their eligibility for a

Stafford Loan and of the terms and conditions of a Stafford

Loan that are more beneficial to a borrower than the terms

and conditions of a PLUS Loan, and to give borrowers an

opportunity to request a Stafford Loan at that time. Also

require entrance counseling for Graduate/Professional PLUS

student borrowers, and include PLUS Loan student

indebtedness information in exit counseling for Stafford

Loan borrowers who have also borrowed PLUS Loans.

Change:

682.603 Certification by a participating school inconnection with a loan application.

(a) A school shall certify that the information it provides

in connection with a loan application about the borrower

and, in the case of a parent borrower, the student for whom

the loan is intended, is complete and accurate. Except as

provided in 34 CFR part 668, subpart E, a school may rely

in good faith upon statements made on the application by

the borrower and, in the case of a parent borrower of a

PLUS loan, the student.

(b) The information to be provided by the school about the

borrower making application for the loan pertains to

(1) The borrower's eligibility for a loan, as determined in

accordance with 682.201 and 682.204;

Pre-decisional DRAFT for discussion on March 12-14, 2007

March 2, 2007 FFEL/DL 2


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Page 2FFEL/DL - Entrance Counseling for Graduate/Professional PLUS

Borrowers

(2) For a subsidized Stafford loan, the student's

eligibility for interest benefits as determined in

accordance with 682.301; and

(3) The schedule for disbursement of the loan proceeds,

which must reflect the delivery of the loan proceeds as set

forth in 682.604(c).

(c) Except as provided in paragraph (e) of this section, in

certifying a loan, a school must certify a loan for the

lesser of the borrower's request or the loan limits

determined under 682.204.

(d) Before certifying a PLUS loan application for a

graduate or professional student borrower, the school must

determine the borrowers eligibility for a Stafford loan.

If the borrower is eligible for a Stafford loan but has not

requested the maximum Stafford loan amount for which theborrower is eligible, the school must

(1) Notify the graduate or professional student borrower of

his or her eligibility for a the maximum Stafford loan

amount that he or she is eligible to receive and . The

notification must provide the borrower with a comparison

of--

(i) The maximum interest rate for a Stafford loan and the

maximum interest rate for a PLUS loan;

(ii) Periods when interest accrues on a Stafford loan and

periods when interest accrues on a PLUS loan; and

(iii) The point at which a Stafford loan enters repayment

and the point at which a PLUS loan enters repayment.

(2) Give the graduate or professional student borrower the

opportunity to request the maximum Stafford loan amount for

which the borrower is eligible.

(ed) A school may not certify a Stafford or PLUS loan,application, or a combination of loansapplications, for a

loan amount that

(1) The school has reason to know would result in the

borrower exceeding the annual or maximum loan amounts in

682.204; or




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Borrowers

(2) Exceeds the student's estimated cost of attendance,

less

(i) The student's estimated financial assistance for that

period; and

(ii) In the case of a Stafford loan that is eligible for

interest benefits, the borrower's expected family

contribution for that period.

* * * * * *

682.604 Processing the borrower's loan proceeds and

counseling borrowers.

* * * * * *

(f) Initial counseling. (1) A school must ensure that

initial counseling is conducted with each Stafford loanborrower either in person, by audiovisual presentation, or

by interactive electronic means prior to its release of the

first disbursement unless the student borrower has received

a prior Federal Stafford, Federal SLS, or Direct subsidized

or unsubsidized loan.

(2) A school must ensure that initial counseling is

conducted with each graduate or professional student PLUS

loan borrower prior to its release of the first

disbursement, unless the student has received a prior

Federal PLUS loan or Direct PLUS loan.

(3) Initial counseling must be conducted either in person,

by audiovisual presentation, or by interactive electronic

means.

(4)A school must ensure that an individual with expertise

in the title IV programs is reasonably available shortly

after the counseling to answer the student borrower's

questions regarding those programs. As an alternative, in

the case of a student borrower enrolled in a correspondence

program or a student borrower enrolled in a study-abroadprogram that the home institution approves for credit, the

counseling may be provided through written materials, prior

to releasing those loan proceeds.

(52) The initial counseling must

(i) Explain the use of a Master Promissory Note;




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Borrowers

(ii) Emphasize to the student borrower the seriousness and

importance of the repayment obligation the student borrower

is assuming;

(iii) Describe the likely consequences of default,

including adverse credit reports, Federal offset, and

litigation;

(iv) In the case of a student borrower of a Stafford loan

or a graduate or professional student borrower of a PLUS

loan (other than a loan made or originated by the school),

emphasize that the student borrower is obligated to repay

the full amount of the loan even if the student borrower

does not complete the program, is unable to obtain

employment upon completion, or is otherwise dissatisfied

with or does not receive the educational or other services

that the student borrower purchased from the school; and

(v) Inform the student borrower of sample monthly repayment

amounts based on a range of student levels of indebtedness

or on the average indebtedness of Stafford loan borrowers,

or graduate or professional student PLUS loan borrowers, or

student borrowers with Stafford and PLUS loans, depending

on the types of loans the borrower has obtained, at the

same school or in the same program of study at the same

school.

(63) If initial counseling is conducted through interactiveelectronic means, the school must take reasonable steps to

ensure that each student borrower receives the counseling

materials, and participates in and completes the initial

counseling.

(74) A school must maintain documentation substantiating

the school's compliance with this section for each student

borrower.

(g) Exit counseling. (1) A school must ensure that exit

counseling is conducted with each Stafford loan borrowereither in person, by audiovisual presentation, or by

interactive electronic means. In each case, the school must

ensure that this counseling is conducted shortly before the

student borrower ceases at least half-time study at the

school, and that an individual with expertise in the title

IV programs is reasonably available shortly after the

counseling to answer the student borrower's questions. As




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Borrowers

an alternative, in the case of a student borrower enrolled

in a correspondence program or a study-abroad program that

the home institution approves for credit, written

counseling materials may be provided by mail within 30 days

after the student borrower completes the program. If a

student borrower withdraws from school without the school's

prior knowledge or fails to complete an exit counseling

session as required, the school must ensure that exit

counseling is provided through either interactive

electronic means or by mailing written counseling materials

to the student borrower at the student borrower's last

known address within 30 days after learning that the

student borrower has withdrawn from school or failed to

complete the exit counseling as required.

(2) The exit counseling must

(i) Inform the student borrower of the average anticipatedmonthly repayment amount based on the student borrower's

indebtedness or on the average indebtedness of student

borrowers who have obtained Stafford loans or SLS or,

student borrowers who have obtained Stafford and PLUS loans,

depending on the types of loans the student borrower has

obtained, for attendance at the same school or in the same

program of study at the same school;

* * * * * *

685.301 Origination of a loan by a Direct Loan Programschool.

(a) Determining eligibility and loan amount. (1) A school

participating in the Direct Loan Program shall ensure that

any information it provides to the Secretary in connection

with loan origination is complete and accurate. A school

shall originate a Direct Loan while the student meets the

borrower eligibility requirements of 685.200. Except as

provided in 34 CFR part 668, subpart E, a school may rely

in good faith upon statements made in the application by

the borrower and, in the case of a parent PLUS loanborrower, the student.

(2) A school shall provide to the Secretary borrower

information that includes but is not limited to

(i) The borrower's eligibility for a loan, as determined in

accordance with 685.200 and 685.203;




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Borrowers

(ii) The student's loan amount; and

(iii) The anticipated and actual disbursement date or dates

and disbursement amounts of the loan proceeds.

(3) Before originating a Direct PLUS Loan for a graduate or

professional student borrower, the school must determine

the borrowers eligibility for a Direct Subsidized and a

Direct Unsubsidized Loan. If the borrower is eligible for

a Direct Subsidized or Direct Unsubsidized Loan but has not

requested the maximum Direct Subsidized or Direct

Unsubsidized Loan amount for which the borrower is eligible,

the school must--

(i) Notify the graduate or professional student borrower of

his or her eligibility for athe maximum Direct Subsidized

or Direct Unsubsidized Loan amount that he or she iseligible to receive and . The notification must provide

the borrower with a comparison of--

(A) The maximum interest rate for a Direct Subsidized Loan

and a Direct Unsubsidized Loan and the maximum interest

rate for a Direct PLUS Loan;

(B) Periods when interest accrues on a Direct Subsidized

Loan and a Direct Unsubsidized Loan, and periods when

interest accrues on a Direct PLUS Loan;

(C) The point at which a Direct Subsidized Loan and a

Direct Unsubsidized Loan enters repayment, and the point at

which a Direct PLUS Loan enters repayment.

(ii) Give the graduate or professional student borrower the

opportunity to request the maximum Direct Subsidized or

Direct Unsubsidized Loan amount for which the borrower is

eligible.

(34) A school may not originate a Direct Subsidized, Direct

Unsubsidized, or Direct PLUS Loan, or a combination ofloans, for an amount that

(i) The school has reason to know would result in the

borrower exceeding the annual or maximum loan amounts in

685.203; or




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Borrowers

(ii) Exceeds the student's estimated cost of attendance

less

(A) The student's estimated financial assistance for that

period; and

(B) In the case of a Direct Subsidized Loan, the borrower's

expected family contribution for that period.

(45)(i) A school determines a Direct Subsidized or Direct

Unsubsidized Loan amount in accordance with 685.203.

(ii) When prorating a loan amount for a student enrolled in

a program of study with less than a full academic year

remaining, the school need not recalculate the amount of

the loan if the number of hours for which an eligible

student is enrolled changes after the school originates the

loan.

(56) The date of loan origination is the date a school

creates the electronic loan origination record.

(67) If a student has received a determination of need for

a Direct Subsidized Loan that is $200 or less, a school may

choose not to originate a Direct Subsidized Loan for that

student and to include the amount as part of a Direct

Unsubsidized Loan.

(78) A school may refuse to originate a Direct Subsidized,Direct Unsubsidized, or Direct PLUS Loan or may reduce the

borrower's determination of need for the loan if the reason

for that action is documented and provided to the borrower

in writing, and if

(i) The determination is made on a case-by-case basis;

(ii) The documentation supporting the determination is

retained in the student's file; and

(iii) The school does not engage in any pattern or practicethat results in a denial of a borrower's access to Direct

Loans because of the borrower's race, gender, color,

religion, national origin, age, disability status, or

income.




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Borrowers

(89) A school may not assess a fee for the completion or

certification of any Direct Loan Program forms or

information or for the origination of a Direct Loan.

(910)(i) The minimum period of enrollment for which a

school may originate a Direct Loan is

(A) At a school that measures academic progress in credit

hours and uses a semester, trimester, or quarter system, a

single academic term (e.g., a semester or quarter); or

(B) At a school that measures academic progress in clock

hours, or measures academic progress in credit hours but

does not use a semester, trimester, or quarter system, the

lesser of

(1) The length of the student's program at the school; or

(2) The academic year as defined by the school in

accordance with 34 CFR 668.3.

(ii) The maximum period for which a school may originate a

Direct Loan is

(A) Generally an academic year, as defined by 34 CFR 668.3,

except that a school may use a longer period of time, not

to exceed 12 months, corresponding to the period to which

the school applies the annual loan limits under 685.203;

or

(B) For a defaulted borrower who has regained eligibility,

the academic year in which the borrower regained

eligibility.

685.304 Counseling borrowers.

(a) Initial counseling. (1) Except as provided in paragraph

(a)(45) of this section, a school must ensure that initial

counseling is conducted with each Direct Subsidized Loan orDirect Unsubsidized Loan student borrower prior to making

the first disbursement of the proceeds of a loan to a

student borrower unless the student borrower has received a

prior Direct Subsidized, Direct Unsubsidized, Federal

Stafford, or Federal SLS Loan.




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Borrowers

(2) Except as provided in paragraph (a)(5) of this section,

a school must ensure that initial counseling is conducted

with each graduate or professional student Direct PLUS Loan

borrower prior to making the first disbursement of the loan

unless the student borrower has received a prior Direct

PLUS Loan or Federal PLUS Loan.

(32) The initial counseling must be in person, by

audiovisual presentation, or by interactive electronic

means. In each case, the school must ensure that an

individual with expertise in the title IV programs is

reasonably available shortly after the counseling to answer

the student borrower's questions. As an alternative, in the

case of a student borrower enrolled in a correspondence

program or a study-abroad program approved for credit at

the home institution, the student borrower may be provided

with written counseling materials before the loan proceeds

are disbursed.

(43) The initial counseling must

(i) Explain the use of a Master Promissory Note (MPN);

(ii) Emphasize to the borrower the seriousness and

importance of the repayment obligation the student borrower

is assuming;

(iii) Describe the likely consequences of default,

including adverse credit reports, garnishment of wages,Federal offset, and litigation;

(iv) Inform the student borrower of sample monthly

repayment amounts based on a range of student levels of

indebtedness or on the average indebtedness of Direct

Subsidized Loan, and Direct Unsubsidized Loan borrowers, or

graduate or professional student Direct PLUS Loan borrowers,

or student borrowers with Direct Subsidized, Direct

Unsubsidized, and Direct PLUS Loans, depending on the types

of loans the borrower has obtained, borrowers at the same

school or in the same program of study at the same school;and

(v) Emphasize that the student borrower is obligated to

repay the full amount of the loan even if the student

borrower does not complete the program, is unable to obtain

employment upon completion, or is otherwise dissatisfied




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Borrowers

with or does not receive the educational or other services

that the student borrower purchased from the school.

(54) A school may adopt an alternative approach for initial

counseling as part of the school's quality assurance plan

described in 685.300(b)(9). If a school adopts an

alternative approach, it is not required to meet the

requirements of paragraphs (a)(1)(34) of this section

unless the Secretary determines that the alternative

approach is not adequate for the school. The alternative

approach must

(i) Ensure that each student borrower subject to initial

counseling under paragraph (a)(1) or (a)(2) of this section

is provided written counseling materials that contain the

information described in paragraph (a)(43) of this section;

(ii) Be designed to target those student borrowers who are

most likely to default on their repayment obligations and

provide them more intensive counseling and support

services; and

(iii) Include performance measures that demonstrate the

effectiveness of the school's alternative approach. These

performance measures must include objective outcomes, such

as levels of borrowing, default rates, and withdrawal rates.

(65) If initial counseling is conducted through interactive

electronic means, a school must take reasonable steps to

ensure that each student borrower receives the counseling

materials, and participates in and completes the initial

counseling.

(76) The school must maintain documentation substantiating

the school's compliance with this section for each student

borrower.

(b) Exit counseling. (1) A school must ensure that exitcounseling is conducted with each Direct Subsidized Loan or

Direct Unsubsidized Loan borrower shortly before the

student borrower ceases at least half-time study at the

school.

* * * * *

(4) The exit counseling must




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Borrowers

(i) Inform the student borrower of the average anticipated

monthly repayment amount based on the student borrower's

indebtedness or on the average indebtedness of student

borrowers who have obtained Direct Subsidized Loans and

Direct Unsubsidized Loans, or student borrowers who have

obtained Direct Subsidized, and Direct Unsubsidized

Loanand Direct PLUS Loans, borrowers, depending on the

types of loans the student borrower has obtained, for

attendance at the same school or in the same program of

study at the same school;

* * * * *




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Contextual Format

Loans Committee

Origin: Community

Issue: FFEL/DL Maximum Length of Loan Period

Regulatory Cite: 682.401, 682.603 and 685.301

Summary of Change: Eliminate the maximum 12-month loan

period for annual loan limits in the FFEL and Direct Loan

programs and the 12-month period of loan guarantee in the

FFEL program to allow institutions to certify a single loan

for students in shorter non-term or nonstandard term

programs and to provide greater flexibility in rescheduling

disbursements for students who drop out and return within

the permitted 180-day period.

Change:

682.401 Basic program agreement.

* * * * *

(b) Terms of agreement. In the basic agreement, the

guaranty agency shall agree to ensure that its loan

guarantee program meets the following requirements at all

times:

(1) Aggregate loan limits. The aggregate guaranteed unpaid

principal amount for all Stafford and SLS, loans made to a

borrower may not exceed the amounts set forth in 682.204

(b), (e), and (g).

(2) Annual loan limits. (i) The annual loan maximum amount

for a borrower that may be guaranteed for an academic year

may not exceed the amounts set forth in 682.204 (a), (c),

(d), (f), and (h).

(ii) A guaranty agency may make the loan amounts authorized

under paragraph (b)(2)(i) of this section applicable for

either

(A) A period of not less than that attributable to the

academic year as defined by 34 CFR 668.3; or




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Page 2FFEL/DL Maximum Length of Loan Period

(B) A period attributable to the academic year, that is not

less than the period specified in (2)(ii)(A) of this

section, in which the student earns the amount of credit in

the student's program of study required by the student's

school as the amount necessary for the student to advance

in academic standing as normally measured on an academic

year basis (for example, from freshman to sophomore or, in

the case of schools using clock hours, completion of at

least 900 clock hours; or.

(C) A period that does not exceed 12 months.

(iii) The amount of a loan guaranteed may not exceed the

amount set forth in 682.204(k).

682.603 Certification by a participating school in

connection with a loan application.

* * * * *

(f)(1) The minimum period of enrollment for which a school

may certify a loan application is

(i) At a school that measures academic progress in credit

hours and uses a semester, trimester, or quarter system, a

single academic term (e.g., a semester or quarter); or

(ii) At a school that measures academic progress in clock

hours, or measures academic progress in credit hours butdoes not use a semester, trimester, or quarter system, the

lesser of

(A) The The length of the student's program at the school;

or

(B) The The academic year as defined by the school in

accordance with 34 CFR 668.3.

(2) The maximum period for which a school may certify a

loan application is

(i) Generally an academic year, as defined by 34 CFR 668.3,

except that a guaranty agency may allow a school to use a

longer period of time, not to exceed 12 months,

corresponding to the period to which the agency applies the

annual loan limits under 682.401(b)(2)(ii); or




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Contextual Format

Loans Committee

Origin: Community

Issue: FFEL/DL Frequency of Capitalization

Regulatory Cite: 682.202 and 685.202

Summary of Change: Limit the frequency of capitalization

on Federal Consolidation Loans, consistent with the current

treatment in the Direct Loan program, during any period of

authorized deferment or forbearance. Capitalization will

take place when the borrower changes status as the end of

these authorized periods. (Note that the relevant section

for Direct Loans is provided, but no modifications are

necessary.)

Change:

682.202 Permissible charges by lenders to borrowers.

* * * * *

(b) Capitalization. (1) A lender may add accrued interest

and unpaid insurance premiums to the borrower's unpaid

principal balance in accordance with this section. This

increase in the principal balance of a loan is calledcapitalization.

(2) Except as provided in paragraph (b)(4) of this section,

a lender may capitalize interest payable by the borrower

that has accrued

(i) For the period from the date the first disbursement was

made to the beginning date of the in-school period;

(ii) For the in-school or grace periods, or for a period

needed to align repayment of an SLS with a Stafford loan,if capitalization is expressly authorized by the promissory

note (or with the written consent of the borrower);

(iii) For a period of authorized deferment;

(iv) For a period of authorized forbearance; or




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Page 2FFEL/DL Frequency of Capitalization

(v) For the period from the date the first installment

payment was due until it was made.

(3) A lender may capitalize accrued interest under

paragraphs (b)(2)(ii) through (iv) of this section no more

frequently than quarterly. Capitalization is again

permitted when repayment is required to begin or resume. A

lender may capitalize accrued interest under paragraph

(b)(2) (i) and (v) of this section only on the date

repayment of principal is scheduled to begin.

(4)(i) For unsubsidized Stafford loans disbursed on or

after October 7, 1998 and prior to July 1, 2000, the lender

may capitalize the unpaid interest that accrues on the loan

according to the requirements of section 428H(e)(2) of the

Act.

(ii) For Stafford loans first disbursed on or after July 1,

2000, the lender may capitalize the unpaid interest

(A) When the loan enters repayment;

(B) At the expiration of a period of authorized deferment;

(C) At the expiration of a period of authorized

forbearance; and

(D) When the borrower defaults.

(5) For any Consolidation Loan, the lender may capitalize

the unpaid interest

(i) At the expiration of a period of authorizedIn-school

deferment or forbearance; or

(ii) When the borrower defaults.

(56) For any borrower in an in-school or grace period or

the period needed to align repayment, deferment, or

forbearance status, during which the Secretary does not payinterest benefits and for which the borrower has agreed to

make payments of interest, the lender may capitalize past

due interest provided that the lender has notified the

borrower that the borrower's failure to resolve any

delinquency constitutes the borrower's consent to

capitalization of delinquent interest and all interest that

will accrue through the remainder of that period.




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Page 3FFEL/DL Frequency of Capitalization

685.202 Charges for which Direct Loan Program borrowers

are responsible.

* * * * *

(b) Capitalization. (1) The Secretary may add unpaidaccrued interest to the borrower's unpaid principal

balance. This increase in the principal balance of a loan

is called capitalization.

(2) For a Direct Unsubsidized Loan or a Direct Unsubsidized

Consolidation Loan that qualifies for a grace period under

the regulations that were in effect for consolidation

applications received before July 1, 2006, the Secretary

capitalizes the unpaid interest that accrues on the loan

when the borrower enters repayment.

(3) Notwithstanding 685.208(l)(5) and 685.209(d)(3), for

a Direct Loan not eligible for interest subsidies during

periods of deferment, and for all Direct Loans during

periods of forbearance, the Secretary capitalizes the

unpaid interest that has accrued on the loan upon the

expiration of the deferment or forbearance.

(4) Except as provided in paragraph (b)(3) of this section

and in 685.208(l)(5), and 685.209(d)(3), the Secretary

annually capitalizes unpaid interest when the borrower is

paying under the alternative or income contingent repayment

plans and the borrower's scheduled payments do not coverthe interest that has accrued on the loan.

(5) The Secretary may capitalize unpaid interest when the

borrower defaults on the loan.




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21/96


Contextual Format

Loans Committee

Origin: Community

Issue: FFEL/DL/Perkins Simplification of

Deferment Granting Process

Regulatory Cite: 674.38, 682.210(s), 682.210(t), and

685.204

Summary of Change: Allow FFEL lenders to grant graduate

fellowship deferments, rehabilitation training program

deferments, unemployment deferments, economic hardship

deferments and military service deferments based on

information from another FFEL loan holder or from the

Department of Education. Also permit the Department ofEducation to grant a deferment on a Direct Loan based on

information from a FFEL loan holder. Allows Perkins

schools to grant deferments based on information from FFEL

lenders or the Department of Education.

Change:

674.38 Deferment procedures.

(a)(1) Except as provided in paragraph (a)(23) of this

section, a borrower must request the deferment and providethe institution with all information and documents required

by the institution by the date that the institution

establishes.

(2) After receiving a borrowers written or verbal request,

an institution may grant a deferment under

674.34(b)(1)(ii), 674.34(b)(1)(iii), 674.34(b)(1)(iv),

674.34(d), 674.34(e), and 674.34(h) if the institution is

able to confirm that the borrower has received a deferment

on another Perkins Loan, a FFEL Loan, or a Direct Loan for

the same reason and the same time period. The institutionmay grant the deferment based on information from the other

Perkins Loan holder, the FFEL Loan holder or the Secretary

or from an authoritative electronic database maintained or

authorized by the Secretary that supports eligibility for

the deferment for the same reason and the same time period.




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Page 2FFEL/DL/Perkins Simplification of Deferment Granting Process

(3) An institution may rely on the information it receives

under paragraph (a)(2) of this section when determining a

borrowers eligibility for a deferment unless the

institution, as of the date of the determination, has

information indicating that the borrower does not qualify

for the deferment. An institution must resolve any

discrepant information before granting a deferment under

paragraph (a)(2) of this section.

(4) An institution that grants a deferment under paragraph

(a)(2) of this section must notify the borrower that the

deferment has been granted and that the borrower has the

option to cancel the deferment and continue to make

payments on the loan.

(25) In the case of an in school deferment, the institution

may grant the deferment based on student enrollmentinformation showing that a borrower is enrolled as a

regular student on at least a half-time basis, if the

institution notifies the borrower of the deferment and of

the borrower's option to cancel the deferment and continue

paying on the loan.

(36) If the borrower fails to meet the requirements of

paragraph (a) (1) of this section, the institution may

declare the loan to be in default, and may accelerate the

loan.

(b)(1) The institution may grant a deferment to a borrower

after it has declared a loan to be a default.

(2) As a condition for a deferment under this paragraph,

the institution

(i) Shall require the borrower to execute a written

repayment agreement on the loan; and

(ii) May require the borrower to pay immediately some or

all of the amounts previously scheduled to be repaid beforethe date on which the institution determined that the

borrower had demonstrated that grounds for a deferment

existed, plus late charges and collection costs.

(c) If the information supplied by the borrower

demonstrates that for some or all of the period for which a

deferment is requested, the borrower had retained in-school




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status or was within the initial grace period on the loan,

the institution shall

(1) Redetermine the date on which the borrower was required

to commence repayment on the loan;

(2) Deduct from the loan balance any interest accrued and

late charges added before the date on which the repayment

period commenced, as determined in paragraph (c)(1) of this

section; and

(3) Treat in accordance with paragraph (b) of this section,

the request for deferment for any remaining portion of the

period for which deferment was requested.

(d) The institution must determine the continued

eligibility of a borrower for a deferment at least

annually, except that a borrower engaged in servicedescribed in 674.34(e)(6), 674.35(c)(3), 674.36(c)(2),

674.37(c)(2), and 674.60(a)(1) must be granted a deferment

for the lesser of the borrower's full term of service in

the Peace Corps, or the borrower's remaining period of

eligibility for a deferment under 674.34(e), not to exceed

3 years.

* * * * * *

682.210 Deferment.

* * * * *

(s) Deferments for new borrowers on or after July 1, 1993

(1) General.(i) A new borrower who receives an FFEL

Program loan first disbursed on or after July 1, 1993 is

entitled to receive deferments under paragraphs (s)(2)

through (s)(6) of this section. For purposes of paragraphs

(s)(2) through (s)(6) of this section, a new borrower is

an individual who has no outstanding principal or interest

balance on an FFEL Program loan as of July 1, 1993 or on

the date he or she obtains a loan on or after July 1, 1993.This term also includes a borrower who obtains a Federal

Consolidation Loan on or after July 1, 1993 if the borrower

has no other outstanding FFEL Program loan when the

Consolidation Loan was made.

(ii) As a condition for receiving a deferment, except for

purposes of paragraph (s)(2) of this section, the borrower




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must request the deferment, and provide the lender with all

information and documents required to establish eligibility

for the deferment.

(iii) After receiving a borrowers written or verbal

request, a lender may grant a deferment under paragraphs

(s)(3) through (s)(6) of this section if the lender is able

to confirm that the borrower has received a deferment on

another FFEL loan or a Direct Loan for the same reason and

same time period. The lender may grant the deferment based

on information from the other FFEL loan holder or the

Secretary or from an authoritative electronic database

maintained or authorized by the Secretary that supports

eligibility for the deferment for the same reason and the

same time period.

(iv) A lender may rely on the information it receives under

paragraph (s)(1)(iii) of this section when determining aborrowers eligibility for a deferment, unless the lender,

as of the date of the determination, has information

indicating that the borrower does not qualify for the

deferment. A lender must resolve any discrepant

information before granting a deferment under paragraph

(s)(1)(iii) of this section.

(v) A lender that grants a deferment under paragraph

(s)(1)(iii) of this section must notify the borrower that

the deferment has been granted and that the borrower has

the option to pay interest that accrues on an unsubsidizedFFEL loan or to cancel the deferment and continue to make

payments on the loan.

(2) In-school deferment. An eligible borrower is entitled

to a deferment based on the borrower's at least half-time

study in accordance with the rules prescribed in

682.210(c), except that the borrower is not required to

obtain a Stafford or SLS loan for the period of enrollment

covered by the deferment.

(3) Graduate fellowship deferment. An eligible borrower isentitled to a graduate fellowship deferment in accordance

with the rules prescribed in 682.210(d).

(4) Rehabilitation training program deferment. An eligible

borrower is entitled to a rehabilitation training program

deferment in accordance with the rules prescribed in

682.210(e).




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(5) Unemployment deferment. An eligible borrower is

entitled to an unemployment deferment in accordance with

the rules prescribed in 682.210(h) for periods that,

collectively, do not exceed 3 years.

(6) Economic hardship deferment. An eligible borrower is

entitled to an economic hardship deferment for periods of

up to one year at a time that, collectively, do not exceed

3 years (except that a borrower who receives a deferment

under paragraph (s)(6)(vi) of this section is entitled to

an economic hardship deferment for the lesser of the

borrower's full term of service in the Peace Corps or the

borrower's remaining period of economic hardship deferment

eligibility under the 3-year maximum), if the borrower

provides documentation satisfactory to the lender showing

that the borrower is within any of the categories described

in paragraphs (s)(6)(i) through (s)(6)(vi) of this section.

(i) Has been granted an economic hardship deferment under

either the Direct Loan or Federal Perkins Loan Programs for

the period of time for which the borrower has requested an

economic hardship deferment for his or her FFEL loan.

(ii) Is receiving payment under a Federal or State public

assistance program, such as Aid to Families with Dependent

Children, Supplemental Security Income, Food Stamps, or

State general public assistance.

(iii) Is working full-time and has a monthly income that

does not exceed the greater of (as calculated on a monthly

basis)

(A) The minimum wage rate described in section 6 of the

Fair Labor Standards Act of 1938; or

(B) An amount equal to 100 percent of the poverty line for

a family of two, as determined in accordance with section

673(2) of the Community Services Block Grant Act.

(iv) Is working full-time and has a Federal education debt

burden that equals or exceeds 20 percent of the borrower's

monthly income, and that income, minus the borrower's

Federal education debt burden, is less than 220 percent of

the amount described in paragraph (s)(6)(iii) of this

section.




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(v) Is not working full-time and has a monthly income that

(A) Does not exceed twice the amount described in paragraph

(s)(6)(iii) of this section; and

(B) After deducting an amount equal to the borrower's

Federal education debt burden, the remaining amount of the

borrower's income does not exceed the amount described in

paragraph (s)(6)(iii) of this section.

(vi) Is serving as a volunteer in the Peace Corps.

(vii) In determining a borrower's Federal education debt

burden for purposes of an economic hardship deferment under

paragraphs (s)(6)(iv) and (v) of this section, the lender

shall

(A) If the Federal postsecondary education loan isscheduled to be repaid in 10 years or less, use the actual

monthly payment amount (or a proportional share if the

payments are due less frequently than monthly);

(B) If the Federal postsecondary education loan is

scheduled to be repaid in more than 10 years, use a monthly

payment amount (or a proportional share if the payments are

due less frequently than monthly) that would have been due

on the loan if the loan had been scheduled to be repaid in

10 years; and

(C) Require the borrower to provide evidence that would

enable the lender to determine the amount of the monthly

payments that would have been owed by the borrower during

the deferment period.

(viii) For an initial period of deferment granted under

paragraphs (s)(6)(iii) through (v) of this section, the

lender must require the borrower to submit evidence showing

the amount of the borrower's monthly income.

(ix) To qualify for a subsequent period of deferment thatbegins less than one year after the end of a period of

deferment under paragraphs (s)(6)(iii) through (v) of this

section, the lender must require the borrower to submit

evidence showing the amount of the borrower's monthly

income or a copy of the borrower's most recently filed

Federal income tax return.




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(x) For purposes of paragraph (s)(6) of this section, a

borrower's monthly income is the gross amount of income

received by the borrower from employment and from other

sources, or one-twelfth of the borrower's adjusted gross

income, as recorded on the borrower's most recently filed

Federal income tax return.

(xi) For purposes of paragraph (s)(6) of this section, a

borrower is considered to be working full-time if the

borrower is expected to be employed for at least three

consecutive months at 30 hours per week.

(t) Military service deferments for loans for which the

first disbursement is made on or after July, 1, 2001(1) A

borrower who receives an FFEL Program loan first disbursed

on or after July 1, 2001, may receive a military service

deferment for such loans for any period not to exceed 3

years during which the borrower is

(i) Serving on active duty during a war or other military

operation or national emergency; or

(ii) Performing qualifying National Guard duty during a war

or other military operation or national emergency.

(2) Serving on active duty during a war or other military

operation or national emergencymeans service by an

individual who is

(i) A Reserve of an Armed Force ordered to active duty

under 10 U.S.C. 12301(a), 12301(g), 12302, 12304 or 12306;

(ii) A retired member of an Armed Force ordered to active

duty under 10 U.S.C. 688 for service in connection with a

war or other military operation or national emergency,

regardless of the location at which such active duty

service is performed; or

(iii) Any other member of an Armed Force on active duty in

connection with such emergency or subsequent actions orconditions who has been assigned to a duty station at a

location other than the location at which member is

normally assigned.

(3) Qualifying National Guard duty during a war or other

operation or national emergencymeans service as a member

of the National Guard on full-time National Guard duty, as




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defined in 10 U.S.C. 101(d)(5), under a call to active

service authorized by the President or the Secretary of

Defense for a period of more than 30 consecutive days under

32 U.S.C. 502(f) in connection with a war, other military

operation, or national emergency declared by the President

and supported by Federal funds.

(4) Payments made by or on behalf of a borrower during a

period for which the borrower qualified for a military

service deferment are not refunded.

(5) A borrower is eligible for a military service deferment

on a Federal Consolidation Loan only if the borrower meets

the conditions described in this section and all of the

title IV loans included in the Consolidation Loan were

first disbursed on or after July 1, 2001.

(6) As used in this section

(i) Active dutymeans active duty as defined in 10 U.S.C.

101(d)(1) except that it does not include active duty for

training or attendance at a service school;

(ii) Military operation means a contingency operation as

defined in 10 U.S.C. 101(a)(13); and

(iii) National emergencymeans the national emergency by

reason of certain terrorist attacks declared by the

President on September 14, 2001, or subsequent nationalemergencies declared by the President by reason of

terrorist attacks.

(7) To receive a military service deferment, the borrower

must request the deferment and provide the lender with all

information and documents required to establish eligibility

for the deferment, except that a lender may grant a

borrower a military service deferment under the procedures

specified in paragraphs (s)(1)(iii) through (s)(1)(v) of

this section.

685.204 Deferment.

(a)(1) A Direct Loan borrower whose loan is eligible for

interest subsidies and who meets the requirements described

in paragraphs (b) and (e) of this section is eligible for a




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deferment during which periodic installments of principal

and interest need not be paid.

(2) A Direct Loan borrower whose loan is not eligible for

interest subsidies and who meets the requirements described

in paragraphs (b) and (e) of this section is eligible for a

deferment during which periodic installments of principal

need not be paid but interest does accrue and is

capitalized or paid by the borrower.

(b) Except as provided in paragraphs (d) and (f) of this

section, a Direct Loan borrower is eligible for a deferment

during any period during which the borrower meets any of

the following requirements:

(1)(i) The borrower

(A) Is carrying at least one-half the normal full-time workload for the course of study that the borrower is pursuing,

as determined by the eligible school the borrower is

attending;

(B) Is pursuing a course of study pursuant to a graduate

fellowship program approved by the Secretary; or

(C) Is pursuing a rehabilitation training program, approved

by the Secretary, for individuals with disabilities; and

(ii) The borrower is not serving in a medical internship orresidency program, except for a residency program in

dentistry.

(iii)(A) For the purpose of paragraph (b)(1)(i)(A) of this

section, the Secretary processes a deferment when

(1) The borrower submits a request to the Secretary along

with documentation verifying the borrower's eligibility;

(2) The Secretary receives information from the borrower's

school indicating that the borrower is eligible to receivea new loan; or

(3) The Secretary receives student status information from

the borrower's school, either directly or indirectly,

indicating that the borrower is enrolled on at least a

half-time basis.




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(e)(1) A borrower who receives a Direct Loan Program loan

first disbursed on or after July 1, 2001, may receive a

military service deferment for such loan for any period not

to exceed 3 years during which the borrower is

(i) Serving on active duty during a war or other military

operation or national emergency; or

(ii) Performing qualifying National Guard duty during a war

or other military operation or national emergency.

(2) Serving on active duty during a war or other military

operation or national emergencymeans service by an

individual who is

(i) A Reserve of an Armed Force ordered to active duty

under 10 U.S.C. 12301(a), 12301(g), 12302, 12304, or 12306;

(ii) A retired member of an Armed Force ordered to active

duty under 10 U.S.C. 688 for service in connection with a

war or other military operation or national emergency,

regardless of the location at which such active duty

service is performed; or

(iii) Any other member of an Armed Force on active duty in

connection with such emergency or subsequent actions or

conditions who has been assigned to a duty station at a

location other than the location at which the member is

normally assigned.

(3) Qualifying National Guard duty during a war or other

operation or national emergencymeans service as a member

of the National Guard on full-time National Guard duty, as

defined in 10 U.S.C. 101(d)(5) under a call to active

service authorized by the President or the Secretary of

Defense for a period of more than 30 consecutive days under

32 U.S.C. 502(f) in connection with a war, other military

operation, or national emergency declared by the President

and supported by Federal funds.

(4) These provisions do not authorize the refunding of any

payments made by or on behalf of a borrower during a period

for which the borrower qualified for a military service

deferment.

(5) A borrower is eligible for a military service deferment

on a Direct Consolidation Loan only if the borrower meets




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Contextual Format

Loans Committee

Origin: ED

Issue: FFEL Eligible Lender Trustees

Regulatory Cite: 682.200 and 682.602 (new)

Summary of Change: Implement The Third Higher Education

Extension Act of 2006 (P.L. 109-292) by amending the

definition of lender to eliminate the ability of a FFEL

lender to enter into an eligible lender trustee (ELT)

relationship with a school or a school-affiliated

organization as of September 30, 2006, and grandfathering

such relationships in existence prior to that date. Add a

new definition of school-affiliated organization, andcreate a new section to apply the same limits imposed on

FFEL school lenders by the Higher Education Reconciliation

Act (P.L. 109-148) to school and school-affiliated ELT

arrangements as of January 1, 2007.

Change:

682.200 Definitions.

Lender. (1) The term eligible lender is defined in

section 435(d) of the Act, and in paragraphs (2)(5) ofthis definition.

(2) With respect to a National or State chartered bank, a

mutual savings bank, a savings and loan association, a

stock savings bank, or a credit union

(i) The phrase subject to examination and supervision in

section 435(d) of the Act means subject to examination and

supervision in its capacity as a lender;

(ii) The phrase does not have as its primary consumercredit function the making or holding of loans made to

students under this part in section 435(d) of the Act

means that the lender does not, or in the case of a bank

holding company, the company's wholly-owned subsidiaries as

a group do not at any time, hold FFEL Program loans that

total more than one-half of the lender's or subsidiaries'

combined consumer credit loan portfolio, including home


March 2, 2007 FFEL 1


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Page 2FFEL Eligible Lender Trustees

mortgages held by the lender or its subsidiaries. For

purposes of this paragraph, loans held in trust by a

trustee lender are not considered part of the trustee

lender's consumer credit function.

(3) A bank that is subject to examination and supervision

by an agency of the United States, making student loans as

a trustee, may be an eligible lender if it makes loans

under an express trust, operated as a lender in the FFEL

programs prior to January 1, 1975, and met the requirements

of this paragraph prior to July 23, 1992.

(4) The corporate parent or other owner of a school that

qualifies as an eligible lender under section 435(d) of the

Act is not an eligible lender unless the corporate parent

or owner itself qualifies as an eligible lender under

section 435(d) of the Act.

(5) The term eligible lender does not include any lender

that the Secretary determines, after notice and opportunity

for a hearing before a designated Department official, has

(i) Offered, directly or indirectly, points, premiums,

payments, or other inducements, to any school or other

party to secure applicants for FFEL loans, except that a

lender is not prohibited from providing assistance to

schools comparable to the kinds of assistance provided by

the Secretary to schools under, or in furtherance of, the

Federal Direct Loan Program.

(ii) Conducted unsolicited mailings to a student or a

student's parents of FFEL loan application forms, except to

a student who previously has received a FFEL loan from the

lender or to a student's parent who previously has received

a FFEL loan from the lender;

(iii) Offered, directly or indirectly, a FFEL loan to a

prospective borrower to induce the purchase of a policy of

insurance or other product or service by the borrower or

other person; or

(iv) Engaged in fraudulent or misleading advertising with

respect to its FFEL program loan activities.

(6) The term eligible lender does not include any lender

that




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(i) Is debarred or suspended, or any of whose principals or

affiliates (as those terms are defined in 34 CFR part 85)

is debarred or suspended under Executive Order (E.O.) 12549

(3 CFR, 1986 Comp., p. 189) or the Federal Acquisition

Regulation (FAR), 48 CFR part 9, subpart 9.4;

(ii) Is an affiliate, as defined in 34 CFR part 85, of any

person who is debarred or suspended under E.O. 12549 (3

CFR, 1986 Comp., p. 189) or the FAR, 48 CFR part 9, subpart

9.4; or

(iii) Employs a person who is debarred or suspended under

E.O. 12549 (3 CFR, 1986 Comp., p. 189) or the FAR, 48 CFR

part 9, subpart 9.4, in a capacity that involves the

administration or receipt of FFEL Program funds.

(7) An eligible lender may not make or hold a loan as

trustee for a school, or for a school-affiliated

organization as defined in this section unless, on or

before September 30, 2006

(i) The eligible lender was serving as trustee for a school

or a school-affiliated organization under a contract

entered into and continuing in effect as of that date, and

(ii) The eligible lender held at least one loan in trust on

behalf of the school or school-affiliated organization on

that date.

(8) Effective January 1, 2007, and for loans first

disbursed on or after that date under a trustee

arrangement, an eligible lender operating as a trustee

under a contract entered into on or before September 30,

2006 and which continues in effect with a school or a

school-affiliated organization, must comply with the

requirements of 682.601(a)(3), (4), (5), (6), (7), and (8)

(9).

* * * * *

School-affiliated organization. For the purpose of an

eligible lender trustee arrangement with a lender, a

school-affiliated organization is any organization that is

directly or indirectly related to a school and includes,

but is not limited to alumni organizations, foundations,

athletic organizations, and social, academic, and

professional organizations.




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* * * * *

682.602 Rules for a school or school-affiliated

organization that makes or originates loans through an

eligible lender trustee.

(a) A school or school-affiliated organization may not

contract with an eligible lender to serve as trustee for

the school or school-affiliated organization unless

(1) The school or school-affiliated organization originated

and continues or renews a contract made on or before

September 30, 2006 with the eligible lender; and

(2) The eligible lender held at least one loan in trust on

behalf of the school or school-affiliated organization onthat date.

(b) Effective JulyJanuary 1, 2007, and for loans first

disbursed on or after that date under a lender trustee

arrangement that continues in effect after September 30,

2006

(1) A school in a trustee arrangement or affiliated with an

organization involved in a trustee arrangement to originate

loans must comply with the requirements of 682.601(a)

except for subparagraphs (a)(4) and (a)(9); and

(2) A school-affiliated organization, as defined in

682.200(b), involved in a trustee arrangement to make

loans must comply with the requirements of 682.601(a)

except for subparagraphs (a)(1), (a)(2), (a)(4), and (a)(6),

and (a)(9).




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Contextual Format

Loans Committee

Origin: ED

Issue: FFEL/DL/Perkins True and

ExactAccurate and Complete Copy of

Death Certificates


Summary of Change: Allow the use of a true accurate and

exact complete copy of a borrowers death certificate, in

addition to the original or a certified copy of the death

certificate, to support the discharge of a borrowers or

parent borrowers Title IV loan.

Change:

674.61 Discharge for death or disability.

(a) Death. An institution must discharge the unpaid balance

of a borrower's Defense, NDSL, or Perkins loan, including

interest, if the borrower dies. The institution must

discharge the loan on the basis of an original,or

certified, or true accurate and exactcomplete photo copy of

the original or certified copy of the death certificate.

Under exceptional circumstances and on a case-by-casebasis, the chief financial officer of the institution may

approve a discharge based upon other reliable documentation

supporting the discharge request.

682.402 Death, disability, closed school, false

certification, unpaid refunds, and bankruptcy payments.

(b) Death. (1) If an individual borrower dies, or the

student for whom a parent received a PLUS loan dies, the

obligation of the borrower and any endorser to make any

further payments on the loan is discharged.

(2) A discharge of a loan based on the death of the

borrower (or student in the case of a PLUS loan) must be

based on an original,or certified, or true accurate and

exact complete photo- copy of the original or certified

copy of the death certificate. Under exceptional

circumstances and on a case-by-case basis, the chief


March 2, 2007 FFEL/DL/Perkins 1


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Page 2FFEL/DL/Perkins Accurate and Complete Copy of Death

Certificates

executive officer of the guaranty agency may approve a

discharge based upon other reliable documentation

supporting the discharge request.

(3) After receiving reliable information indicating that

the borrower (or student) has died, the lender must suspend

any collection activity against the borrower and any

endorser for up to 60 days and promptly request the

documentation described in paragraph (b)(2) of this

section. If additional time is required to obtain the

documentation, the period of suspension of collection

activity may be extended up to an additional 60 days. If

the lender is not able to obtain an original,or certified,

or true accurate and exact complete photo copy ofthe

original or certified copy of the death certificate or

other documentation acceptable to the guaranty agency,

under the provisions of paragraph (b)(2) of this section,

during the period of suspension, the lender must resume

collection activity from the point that it had been

discontinued. The lender is deemed to have exercised

forbearance as to repayment of the loan during the period

when collection activity was suspended.

(4) Once the lender has determined under paragraph (b)(2)

of this section that the borrower (or student) has died,

the lender may not attempt to collect on the loan from the

borrower's estate or from any endorser.

(5) The lender shall return to the sender any paymentsreceived from the estate or paid on behalf of the borrower

after the date of the borrower's (or student's) death.

(6) In the case of a Federal Consolidation Loan that

includes a Federal PLUS or Direct PLUS loan borrowed for a

dependent who has died, the obligation of the borrower or

any endorser to make any further payments on the portion of

the outstanding balance of the Consolidation Loan

attributable to the Federal PLUS or Direct PLUS loan is

discharged as of the date of the dependent's death.

685.212 Discharge of a loan obligation.

(a) Death. (1) If a borrower (or the student on whose

behalf a parent borrowed a Direct PLUS Loan) dies, the

Secretary discharges the obligation of the borrower and any

endorser to make any further payments on the loan based on

an original,or certified, or true accurate and exact




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Page 3FFEL/DL/Perkins Accurate and Complete Copy of Death

Certificates

complete photo copy ofthe original or certified copy of

the borrower's (or student's in the case of a Direct PLUS

loan obtained by a parent borrower) death certificate.

(2) If an original,or certified, or true accurate and exact

complete photo- copy of the original or certified copy of

the death certificate is not available, the Secretary

discharges the loan only based on other reliable

documentation that establishes, to the Secretary's

satisfaction, that the borrower (or student) has died. The

Secretary discharges a loan based on documentation other

than an original,or certified, or true accurate and exact

complete photo- copy of the original or certified copy of

the death certificate only under exceptional circumstances

and on a case-by-case basis.

(3) In the case of a Direct PLUS Consolidation Loan that

repaid a Direct PLUS Loan or a Federal PLUS Loan obtained

on behalf of a student who dies, the Secretary discharges

an amount equal to the portion of the outstanding balance

of the consolidation loan, as of the date of the student's

death, attributable to that Direct PLUS Loan or Federal

PLUS Loan.




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Contextual Format

Loans Committee

Origin: ED

Issue: FFEL/DL/Perkins Prospective

Conditional Discharge Period to

Establish Eligibility for a Total and

Permanent Disability Discharge (i.e.

Retroactive Total and Permanent

Disability Discharges)


Summary of Change: Restructure the regulations to ensure

alignment with the discharge process. Provide for a

prospective conditional discharge period to establisheligibility for a total and permanent disability discharge

that is three years in duration beginning on the date that

the Secretary makes an initial determination that a

borrower is totally and permanently disabled. Also, in

order to qualify for a discharge, the borrower must meet

the definition of total and permanent disability and

receive no further title IV loans from the date the

physician certifies the borrowers total and permanent

disability on the discharge application.

Change:

674.61 Discharge for death or disability

* * * * *

(b) Total and permanent disability. (1) General. A

borrowers Defense, NDSL or Perkins loan is discharged if

the borrower becomes totally and permanently disabled, as

defined in 674.51(s), and satisfies the additional

eligibility requirements contained in this section.

(2) Discharge application process. (i) To qualify for

discharge of a Defense, NDSL or Perkins loan based on a

total and permanent disability, a borrower must submit a

discharge application approved by the Secretary to the

institution that holds the loan. The application must

contain a certification by a physician, who is a doctor of




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Page 3FFEL/Perkins Prospective Conditional Discharge Period to

Establish Eligibility for a Total and Permanent Disability Discharge

disability discharge, the borrower is considered totally

and permanently disabled as of the date the physician

completes and certifies the borrowers application. The

borrowers condition must continue to meet the conditions

of the definition and the borrower must not receive any

title IV loans until the Secretary makes an initial

determination of the borrowers eligibility in accordance

with paragraph (b)(3)(ii) of this section.

(iii) Upon making an initial determination that the

borrower is totally and permanently disabled as defined in

674.51(s), tThe Secretary notifies the borrower that the

loan will be in a conditional discharge status for a period

of up to three years years, beginning on the date the

Secretary makes the initial determination that the borrower

is totally and permanently disabled. upon making an initial

determination that the borrower is totally and permanently

disabled as defined in 674.51(s). This The notificationto the borrower identifies the conditions of the

conditional discharge period specified in paragraph

(b)(4)(i) of this section. The conditional discharge

period begins on the date the Secretary makes the initial


disabled.

(iiiiv) If the Secretary determines that the certification

provided by the borrower does not support the conclusion

that the borrower meets the criteria for a total and

permanent disability discharge, the Secretary notifies theborrower that the application for a disability discharge

has been denied, and that the loan is due and payable under

the terms of the promissory note.

(4) Eligibility Requirements for a Total and Permanent

Disability Discharge. (i) A borrower meets the eligibility

criteria for a discharge of a loan based on a total and

permanent disability if, during and at the end of the

three-year conditional discharge period

(A) The borrowers annual earnings from employment do notexceed 100 percent of the poverty line for a family of two,

as determined in accordance with the Community Service

Block Grant Act; and

(B) The borrower does not receive a new loan under the

Perkins, FFEL or Direct Loan programs, except for a FFEL or




46/96



Direct Consolidation Loan that does not include any loans

that are in a conditional discharge status; and.

(C) The borrower ensures that the full amount of any title

IV loan disbursement made on or after the date of the

Secretarys initial eligibility determination is returned

to the holder within 120 days of the disbursement date.

(ii) During the conditional discharge period, the borrower

or, if applicable, the borrowers representative

(A) Is not required to make any payments on the loan;

(B) Is not considered past due or in default on the loan,

unless the loan was past due or in default at the time the

conditional discharge was granted;

(C) Must promptly notify the Secretary of any changes inaddress or phone number;

(D) Must promptly notify the Secretary if the borrowers

annual earnings from employment exceed the amount specified

in paragraph (4)(i)(A) of this section; and

(E) Must provide the Secretary, upon request, with

additional documentation or information related to the

borrowers eligibility for a discharge under this section.

(iii) If, at any time during or at the end of the three-year conditional discharge period, the Secretary determines

that the borrower does not continue to meet the eligibility

requirements for a total and permanent disability

discharge, the Secretary ends the conditional period and

resumes collection activity on the loan. The Secretary

does not require the borrower to pay any interest that

accrued on the loan from the date of the Secretarys

initial determination described in paragraph (b)(3) of this

section through the end of the conditional discharge period.

(5) Payments Received After the Physicians Certificationof Total and Permanent Disability. (i) If, after the date

the physician completes and certifies the borrowers loan

discharge application, the institution receives any

payments from or on behalf of the borrower on or

attributable to a loan that was assigned to the Secretary

for determination of eligibility for a total and permanent

disability discharge, the institution must forward those




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payments to the Secretary for crediting to the borrowers

account.

(ii) At the same time that the institution forwards the

payment, it must notify the borrower that there is no

obligation to make payments on the loan while it is

conditionally discharged prior to a final determination of

eligibility for a total and permanent disability discharge,

unless the Secretary directs the borrower otherwise.

(iii) When the Secretary makes a final determination to

discharge the loan, the Secretary returns to the sender any

payments received on the loan after the date the physician

completed and certified the borrowers loan discharge

application.

(c) No Federal Reimbursement. No Federal reimbursement is

made to an institution for cancellation of loans due todeath or disability.

(d) Retroactive. Discharge for death applies retroactively

to all Defense, NDSL and Perkins loans.

685.213 Total and Permanent Disability

(a) General. A borrowers Direct Loan is discharged if the

borrower becomes totally and permanently disabled, as

defined in 682.200(b), and satisfies the additionaleligibility requirements contained in this section.

(b) Discharge application process. (1) To qualify for a

discharge of a Direct Loan based on a total and permanent

disability, a borrower must submit to the Secretary a

certification by a physician, who is a doctor of medicine

or osteopathy legally authorized to practice in a State,

that the borrower is totally and permanently disabled as

defined in 682.200(b). The certification must be on a

form approved by the Secretary. The borrower must submit

the application to the Secretary within 30 days of the datethe physician certifies the application.

(2) Upon receipt of the borrowers application, the

Secretary notifies the borrower that

(i) No payments are due on the loan; and




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(ii)To remain eligible for the discharge from the date the

physician completes and certifies the borrowers total and

permanent disability on the application until the date the

Secretary makes an initial eligibility determination

(A) The borrower cannot work and earn money or receive any

new title IV loans; and

(B) The borrower must, within 120 days of the disbursement

date, ensure that the full amount of any title IV loan

disbursement made to the borrower on or after the date the

physician completes and certifies the application is

returned to the holder.

(c) Initial Determination of Eligibility. (1) The borrower

must continue to meet the conditions of paragraph (b)(2)(ii)

of this section from the date the physician completes and

certifies the borrowers total and permanent disability onthe application until the Secretary makes an initial


with paragraph (c)(2) of this section.

(2) If, after reviewing the borrowers application, the

Secretary determines that the certification provided by the

borrower supports the conclusion that the borrower meets

the criteria for a total and permanent disability

discharge, the borrower is considered totally and

permanently disabled as of the date the physician completes

and certifies the borrowers application. The borrowerscondition must continue to meet the conditions of the

definition and the borrower must not receive any further

title IV loans until the Secretary makes an initial


with paragraph (c)(2) of this section.

(23) The Secretary suspends collection activity and

notifies the borrower that the loan will be in a

conditional discharge status for a period of up to three

years upon making an initial determination that the

borrower is totally and permanently disabled as defined in682.200(b). This notification identifies the conditions of

the conditional discharge period specified in paragraph

(d)(1) of this section. The conditional discharge period

begins on the date the Secretary makes the initial


disabled.




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(34) If the Secretary determines that the certification

provided by the borrower does not support the conclusion

that the borrower meets the criteria for a total and

permanent disability discharge, the Secretary notifies the

borrower that the application for a disability discharge

has been denied, and that the loan is due and payable under

the terms of the promissory note.

(d) Eligibility Requirements for Total and Permanent

Disability. (1) A borrower meets the eligibility

requirements for a total and permanent disability discharge

if, during and at the end of the three-year conditional

discharge period

(A) the borrowers annual earnings from employment do not

exceed 100 percent of the poverty line for a family of two,

as determined in accordance with the Community Service

Block Grant Act; and

(B) The borrower does not receive a new loan under the

Perkins, FFEL or Direct Loan programs, except for a FFEL or

Direct Consolidation Loan that does not include any loans

that are in a conditional discharge status.; and

(C) The borrower ensures that the full amount of any title

IV loan disbursement made to the borrower on or after the

date of the Secretarys initial eligibility determination

is returned to the holder within 120 days of the

disbursement date.

(2) During the conditional discharge period, the borrower

or, if applicable, the borrowers representative

(A) Is not required to make any payments on the loan;

(B) Is not considered past due or in default on the loan,

unless the loan was past due or in default at the time the

conditional discharge was granted;

(C) Must promptly notify the Secretary of any changes inaddress or phone number;

(D) Must promptly notify the Secretary if the borrowers

annual earnings from employment exceed the amount specified

in paragraph (d)(1)(A) of this section; and




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(E) Must provide the Secretary, upon request, with

additional documentation or information related to the

borrowers eligibility for a discharge under this section.

(3) If the borrower continues to meet the eligibility

requirements for a total and permanent disability discharge

during and the end of the three-year conditional discharge

period, the Secretary

(i) Discharges the obligation of the borrower and any

endorser to make any further payments on the loan at the

end of that period; and

(ii) Returns to the borrower any payments received after

the date the physician completed and certified the

borrowers loan discharge application.

(4) If, at any time during or at the end of the three-yearconditional discharge period, the borrower does not

continue to meet the eligibility requirements for total and

permanent disability discharge, the Secretary resumes

collection activity on the loan. The Secretary does not

require the borrower to pay any interest that accrued on

the loan from the date of the Secretarys initial

determination described in paragraph (c)(2) of this section

through the end of the conditional discharge period.

(e) Provisions for discharge of Direct Consolidation Loans.

(1) For a Direct Consolidation Loan, a borrower isconsidered totally and permanently disabled if he or she

would be considered totally and permanently disabled under

the provisions of this section for all of the loans that

were included in the Direct Consolidation Loan if those

loans had not been consolidated.

(2) For the purposes of discharging a loan under paragraph

(e)(1) of this section, the provisions of this section apply

to each loan included in the Direct Consolidation Loan,

even if the loan is not a Direct Loan Program loan.

(3) If requested, a borrower seeking to discharge a loan

obligation under paragraph (e)(1) of this section must

provide the Secretary with the disbursement dates of the

underlying loans.




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682.402 Death, disability, closed school, false

certification, unpaid refunds, and bankruptcy payments.

* * * * *

(c) Total and permanent disability. (1) A borrowers loanis discharged if the borrower becomes totally and

permanently disabled, as defined in 682.200(b), and

satisfies the additional eligibility requirements contained

in this section.

(2) Discharge application process. (i) After being notified

by the borrower or the borrower's representative that the

borrower claims to be totally and permanently disabled, the

lender promptly requests that the borrower or the

borrower's representative submit, on a form approved by the

Secretary, a certification by a physician, who is a doctor

of medicine or osteopathy legally authorized to practi

Documents

description: tags: loans-proposed-2